Wall Street analysts have a bullish view on PayPal (NASDAQ:PYPL) stock right now, with 48 sell-side analysts covering it, according to the Wall Street Journal. Among them 30 rate it either “Buy” or the equivalent to buy (“Overweight”), 17 out of the remaining 18 rate shares a “Hold,” with one sole analyst assigning a “Sell” rating to this stock.

Sell-siders are optimistic about PayPal’s turnaround, but obstacles may hinder stock recovery. Instead of adding to its recent post-earnings gains, PYPL could deliver a lackluster performance from here. At best, the stock could make middling gains. At worst, it may slide lower from here.

Analysts and a PYPL Stock Comeback

PayPal shares are down by around 23.6% since the start of 2023. Sitting hitting a new all-time closing high back in 2021, shares are down a staggering 81.5%. The market at-large clearly stopped cutting any slack for this stock a long while ago.

But even as PYPL stock is out of favor amongst the investing public, most analysts continue to give PayPal the benefit of the doubt. Sure, some of the stock’s most vocal fans among the analyst community have walked back their bullishness a bit.

For instance, while Morgan Stanley’s James Faucette continues to give shares an “Overweight” rating, and a $126 per share price target (PYPL currently trades in the mid-$50s per share). As I pointed out before, Faucette has conceded that there is a risk that PayPal’s financial problems could worsen.

Mizhuo’s Dan Dolev says “don’t lose hope” about this stock, yet at the same time has walked back his earnings forecasts.

Still, even while somewhat cautious in their optimism, these sell-side remain upbeat that a modicum of improvement is possible, and that this will be enough to send shares back toward high double-digit or triple-digit price levels. As before, I beg to differ.

What May Prevent a PayPal Recovery

It may not take much for the company to meet expectations with its revenue and earnings in 2024. 8.75% revenue growth, and 12.9% earnings growth, may be attainable. Strategic changes implemented by new CEO Alex Chriss may lead to such a modest level of increased revenue.

These changes, plus the impact of financial engineering efforts like cost-cutting and share repurchases, suggest earnings per share improvements are very possible. Yet while a path for improved results is out there, keep two things in mind.

First, forecasts may not be underestimating the impact of competition in the payments space from fintech, big tech, and the big banks alike. These forecasts may also not be fully factoring in the impact of global economic growth slowing down further over the next twelve months.

Second, even if competition and a global economic slowdown fail to threaten improved results from PayPal, don’t assume hitting, or slightly beating, expectations will pave the way for a PYPL stock recovery.

At best, shares could rise in line with increased earnings, but not much further than that. There are two reasons this “fintech trading at a bank stock valuation” could keep sporting a seemingly low forward multiple.

The Verdict

PYPL trades for just 11.5 times forward earnings. The sell-side’s bull case hinges on slight improvements to results leading to an outsized multiple expansion.

However, remember that one-and-done efforts like cost-cutting will drive improved results next year. Unless issues like declining active users are resolved, the uncertainty about future earnings growth could persist, keeping shares at a low multiple.

Even as some question why PayPal trades at a bank stock multiple, the days of established fintechs trading at big premiums to that of the big banks may be a thing of the past, especially as regulators mull starting to treat them like traditional financial institutions.

Bottom line: Shares could make just small gains if results improve, but slide lower again if the above-mentioned risks outweigh turnaround efforts. Tune out the sell-side’s optimism, and keep skipping out on PYPL stock.

PYPL stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.